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FAQ: Student Loan Wage Garnishment Returns and Congressional Response
TL;DR
Employers can gain compliance advantage by implementing quarterly verification systems to avoid legal penalties from improper wage garnishments under the new congressional bill.
The Department of Education restarted administrative wage garnishment in May 2025, allowing up to 15% of disposable pay to be withheld without court orders.
The bipartisan bill protects vulnerable workers from unfair wage seizures while ensuring debt collection remains fair and transparent for all parties involved.
Congress introduced legislation that would suspend wage garnishment for student loans and require double damages for improper seizures by the Department of Education.
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Administrative wage garnishment is a collection tool that allows the government to seize up to 15% of a worker's disposable pay without a court order to collect defaulted student loan debt.
The renewed collection effort began in May 2025, following a multi-year pause in federal student loan collections.
The Department of Education's collection restart directly impacts an estimated 5.5 million people currently in default on student loans, with millions more at risk of falling into delinquency.
This bipartisan bill (S. 1764 / H.R. 3412) seeks to immediately suspend the Secretary of Education's authority to use wage garnishment for defaulted student loans until new borrower protections and administrative safeguards are implemented.
The bill would prohibit garnishment on loans outstanding for more than 10 years, require refunds of improperly garnished wages within one week, establish quarterly verification processes for employers, create a private right of action for borrowers, and require double damages for improper seizures.
Proponents argue the current AWG system is prone to error, disproportionately harms vulnerable workers struggling with consumer debt, and lacks sufficient borrower protections and appeal avenues.
Employers face increased administrative burden and must carefully navigate complex garnishment rules, as improper withholding carries legal and financial penalties under the proposed legislation.
The Department of Education is also intercepting tax refunds and Social Security benefits as part of the comprehensive debt collection restart.
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